Analog Devices, Inc. (ADI) is a semiconductor company specializing in data conversion and signal processing applications. The stock traded to an all-time intraday high of $105.83 on Friday, Feb. 15. This is a strong momentum stock that has a string of beating analysts' earnings per share (EPS) estimates for 17 consecutive quarters.
Analog Devices stock closed Friday, Feb. 15, at $105.74, up 23.2% so far in 2019 and in bull market territory up 38% since trading as low as $76.62 on Oct. 26. I do not show any longer-term risky levels, and the weekly chart shows an overbought condition, which means that there's a high probability that my quarterly pivot at $102.07 will be tested before the end of March.
Analysts expect Analog Devices to post EPS of $1.28 when the company reports results before the open on Feb. 20. Analysts expect a year-over-year decline in earnings and revenue, making an earnings beat extremely important. Company guidance on new cutting-edge innovations will thus be important news. This will include next-generation wireless systems and networks.
The daily chart for ADI
The daily chart for Analog Devices shows that the stock did have a 15% correction from its Dec. 3 market-weakness high of $94.62 to its Dec. 26 low of $80.08. The price action on Dec. 26 was a "key reversal," as the stock closed at $84.34 on Dec. 26, above the Dec. 24 high of $82.91.
On Dec. 31, the stock closed at $85.83, which was the input to my proprietary analytics. This resulted in my annual, semiannual and quarterly pivots at $89.65, 96.30 and $102.07, respectively. The Jan. 31 close of $98.86 generated my monthly value level at $90.06. For this week, I show a weekly risky level at $108.79.
The weekly chart for ADI
The weekly chart for Analog Devices is positive but overbought, with the stock above its five-week modified moving average of $97.78. The stock is well above its 200-week simple moving average, or "reversion to the mean," at $75.51. The 12 x 3 x 3 weekly slow stochastic reading ended last week rising to 85.44, up from 80.24 on Feb. 8. These readings are above the overbought threshold of 80.00. A rise above 90.00 would make the stock an "inflating parabolic bubble."
Trading Strategy: Buy Analog Devices shares on weakness to my semiannual, monthly and annual value levels at $96.30, $90.05 and $89.65, respectively, and reduce holdings on strength to my weekly risky level at $108.79. My quarterly pivot should be a magnet on weakness.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.